A group of American investors took control of British soccer team Chelsea FC last month – and some Wall Street insiders are still struggling to understand why.
Todd Boehley – a co-owner of the Los Angeles Dodgers whose free-spend strategy over the past decade has been credited with reviving the MLB team – promised a similar deal for Chelsea when he signed on May 30. announced that he and a consortium of investors had purchased. Team for over £2.5 billion, or $3.1 billion.
However, Boehli has also sought to draw a line between his cash-intensive approach and that of Russian oligarch Roman Abramovich, who reportedly lost £900,000 a day during his 19-year ownership tenure, on the team payroll. spend more than £2 billion. And redefining a new era of grand spending in football.
In particular, sources close to the situation say that Boiley and his main co-investment partner Clearlake Capital, a buyout fund based in Santa Monica, Calif., are looking to Liverpool — which is also home to another US-based investor, the billionaire. Owned by John Henry. Fenway Sports Group – as an example they would like to follow.
Liverpool generates £200 million in EBITDA – or earnings before interest, taxes, depreciation and amortization, a closely watched financial metric – compared to Chelsea’s £50 million, according to information on the teams’ finances. according. If Chelsea can match Liverpool’s EBITDA, the acquisition will look like a relative deal, according to sources familiar with Boehly and Clearlake’s thinking.
In the 2021-2022 season, Chelsea had the second-highest payroll in the Premier League at £355 million. According to football site Marca, Liverpool came in fourth place with £314 million. Meanwhile, sources close to Chelsea’s new owners note that Bohli’s Dodgers have hired 30 people to study “data analytics” – a practice usually aimed at looking for strong players at good prices. used, as depicted in the movie “Moneyball” – while Chelsea currently have four.
Abramovich’s exorbitant spending resulted in Chelsea winning five Premier League titles and two Champions League trophies as the best club team in the world.
Evidence of a more flamboyant, numbers-driven approach emerged last week, when it was leaked to the press that Bohli had roped in Romelu Lukaku, Belgian football star Chelsea to return to the Italian for £97.5 million last summer. had made happy Football Club Inter Milan.
Still, insiders say it’s unclear whether such changes will be enough to achieve the big returns Clearlake and its investors have become accustomed to. The firm’s 2012 and 2015 buyout funds produced net internal rates of 41 percent and 33 percent per annum, respectively, as of June 30, 2021.
According to public records, this made the money among the best performers for those raised at the time, compared to legendary buyout heavyweights such as Blackstone Group or Carlyle Group.
Clearlake and Boehly, each of which have poured more than $1 billion of equity into the deal, share governance control over the budget, including payroll. Sources close to Clearlake say the firm is focusing less on cost reduction than on increasing revenue, which they said was less than £500 million recently, versus Manchester United’s estimated £700. million in revenue. Sources said the plan is to seize the naming rights and sponsorship opportunities.
Nevertheless, bankers close to the deal note that profits face at least one major hurdle – Chelsea’s 117-year-old Stamford Bridge stadium in London to increase its seating capacity is estimated to cost more than £1 billion. But a vow to rebuild. Fans worry there will be more luxury suites and higher ticket prices for fans – Bohli has scrambled in recent weeks to downplay concerns about the latter.
“You need to put £1 billion in a new building and they lose money,” said one sports banker. “I’m not a big fan of this deal.”
Chelsea lost £146 million ($178 million) for the year ending June 30, 2021, when stadiums were evacuated amid the pandemic. According to football.london, it made a profit of £39.5 million ($48 million) the previous year.
In any case, Behdad Agbali and Jose Feliciano, the co-founders of Clearlake, will make money from the Chelsea deal. That’s because Clearlake charges its investors a 1.7% annual management fee on investments, and Clearlake put the money equal to 2% of its funds, according to a November presentation by Clearlake to the Connecticut Treasury. This type of fee is typical in the private equity industry, and for this reason American sports leagues do not allow private equity firms to have a controlling stake in teams.
Over five years, Clearlake Partners will earn 8.5% of the firm’s funds in fees, while risking only 2% of its own money in the fund that actually buys the team. Clearlake also gets a 20 percent cut in the fund’s profits, so will earn more if Chelsea is a good investment.
Connecticut pension advisor Hamilton Lane said, “Both Clearlake’s assets under management and transaction volume continue to grow at a substantial pace, which reflects Clearlake’s investment discipline and the team’s ability to effectively deploy an increasingly large pool of capital.” raises concerns of potential adverse effects.” A report, according to state records.
Lane recommended that the state invest in Clearlake. But some Chelsea fans are less excited.
“Generally speaking, Americans don’t get ‘soccer’ and my fear is that if there is no passion or desire for the club within the ownership we are no longer a football club and we become purely a business. ,” said Martin Pierce. Chelsea season ticket holder for over 30 years
“Roman Abramovich was very popular, all politics aside, and was clearly passionate about the team and the success they brought us,” Pierce said. “Rumors have it that the real fans will have to make way for the ‘corporate fans’. Once that happens, the atmosphere and the excitement disappears.”
